Bankers should be treated by politicians as 'essential friends', says Lord Heseltine

Coalition ministers must stop bashing the bankers and instead treat them as ‘essential friends’, Lord Heseltine has said.

The senior Tory statesman, the Government’s economic growth supremo, warned that financial institutions must not be seen as the enemy.

He said the City was of ­enormous importance to the economic recovery and ‘skilled political judgment’ was needed in reforming banks.

Lord Heseltine also controversially claimed that the problems in the Square Mile existed only at the ‘fringes’.

Lord Heseltine said: ‘My view is a very clear one - the City of ­London is a vital part of the national economy. It is a world-class industry and brings huge wealth to this country.

‘The politics [of the City] are very difficult, so skilled political judgment is needed to make sure you don’t throw the baby out with the bathwater, and there are at the fringes difficult things to defend.

'But the underlying health of the City and the ­financial world are of enormous significance to us.’

In an interview with The Times, Lord Heseltine urged the Coalition not to be overly aggressive with banks.

His comments are significant because the peer has been given the role of handing out £1.4billion in regional business funds to new ventures.

But last night he gave an impassioned defence of banks, saying: ‘Of course things have gone wrong in the banks, but I would be very worried about political judgments that put the banks as enemies.

‘They are essential friends, even if, like your closest friends, there are things you absolutely have to tell them.’

His words will be seen as a slap down of Business Secretary Vince Cable, who has called bankers ‘spivs and speculators’. Before the election, he pledged a ban on any cash bonuses for bankers over £25,000.

Rift: Vince Cable and Nick Clegg want tough action against the banks

Lord Heseltine also accused ministers of talking down the economy, saying the biggest barrier to growth was the Coalition’s pessimism.

In remarks that will sit uneasily with Chancellor George Osborne, he said: ‘The Government’s first task was to explain the severity of the crisis and pin it on the outgoing government.

'They did that very successfully. But the consequence of explaining the crisis is to create uncertainty about the future.’

The 77-year-old, who served as Defence Secretary under Margaret Thatcher and Deputy Prime Minister under John Major, also said that the unions caused ‘very minimal’ difficulties compared with the strikes in the 1980s although he supported a ban on irresponsible walkouts.

Lord Heseltine, who built up a fortune through his Haymarket media group, said that there were ‘broadly encouraging’ signs of an economic recovery.

His remarks will be seized on by political opponents who will claim that the Coalition is driving through cuts based on ideology rather than necessity.